Chicago-based CME Group will officially launch its first European exchange on Sunday evening after receiving long-awaited regulatory approval to offer foreign exchange products.

CME Europe gained final sign-off from the Bank of England to offer trading in FX futures yesterday, which will be a relief to the bourse operator after months of delays because of issues related to the settlement process for currency products.

The exchange had intended to launch last September but was forced to delay, citing a "technical issue around the delivery of physical currencies".

The problem stemmed from difficulties with establishing a link to CLS, the global FX settlement provider owned by a consortium of banks and other financial institutions.

Last month, the CME said it had received approval from the UK's Financial Conduct Authority and the Bank of England to list commodity products. At the time, the exchange said obtaining FX approval depended on agreeing an alternative settlement mechanism with clearing members.

CME Europe will use a so-called paired settlement model, which requires members to settle trades through CLS agents bilaterally, similar to the model used for spot or OTC FX settlement. This differs from the original third-party agent model the exchange currently uses for settling FX trades.

Now that FX approval has finally been granted, CME Europe will launch with both energy and FX derivatives.

It will initially offer biodiesel contracts that have previously been processed as over-the-counter derivatives in CME Clearing Europe and 30 FX pairs.

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William Knottenbelt, senior managing director, Europe, the Middle East and Africa for CME Group, said: "We have a lot of people who aren’t trading our FX products in the US joining the European exchange. This is what we were trying to do in the first place."

He added: "We will be converting more of our biofuel swaps to futures in the coming months and are looking at opportunities across our product groups – whether that be metals, agricultural products or interest rates."

CME Europe forms part of the CME Group’s plan to take advantage of new rules for derivatives markets that include measures to encourage the trading of swaps of exchange-like platforms and the use of clearing houses to mitigate risk.

Currently, the bulk of FX derivatives are traded privately between two counterparties. Banks that continue to trade swaps bilaterally will face higher capital charges under Basel III rules.

The CME also hopes its European market will help attract more Asian customers. Knottenbelt said last month that interest in CME's FX futures was increasing among its Asian client base.